Calidra III

Environmental & Social Review Summary

This Environmental and Social Review Summary is prepared and distributed in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board of Director’s decision. Board dates are estimates only.
Any documentation which is attached to this Environmental and Social Review Summary has been prepared by the project sponsor and authorization has been given for public release. IFC has reviewed this documentation and considers that it is of adequate quality to be released to the public but does not endorse the content.

Project number	26671
Country	Mexico
Sector	Oil, Gas and Mining
Department	Global Manufacturing & Services
Company name	Grupo Calidra, S.A. de C.V.
Environmental category	B
Status	Pending Disbursement

Date ESRS disclosed	March 19, 2008

Previous Events	Approved: May 5, 2008

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Overview

Category & Applicable Standards

Key Issues & Mitigation

Community Engagements

Client's Documentation

Overview of IFC's scope of review

The review of this project consisted of appraising technical, environmental, health, safety and social information submitted by the company, and assessing the company’s operations through a field visit conducted by the project team. The environmental and social (E&S) appraisal team visited the company operations and held meetings with the management staff at headquarters as well as at the various operations to discuss the E&S issues.

Project description

Grupo Calidra S.A. de C.V. (Calidra) is Mexico’s leading producer of lime, construction hydrated lime, quicklime, dolomitic lime, chemical hydrated lime, and calcium carbonate products. It operates twenty plants across Mexico and one in Honduras. Nine of its plants comprise quarrying, calcination, hydration and packaging, 11 plants are combined hydrators and packaging operations, and one paper bag manufacturing plant. Its products are used in the construction, steel, chemical, mining, agricultural, waste treatment, and other industries.

The proposed project with IFC includes:

- the modernization and replacement of some of its existing production facilities;
- capital expenditures for the modernization and environmental upgrade (including energy efficiency investments) of three production facilities resulting from the recent acquisition of a competitor with operations in the western region of Mexico; and
- environmental improvements to existing operations.

Key environmental and social issues and mitigation

- Land and natural environment:

Calidra does not and will not operate in protected areas. A few of its operations (Caleras de la Laguna, Cal de Apasco, and Purisima) are located in residential areas

- Environmental and Social (E&S) Assessment:

Calidra has programs in place to prevent and reduce air emissions, liquid effluents, soil contamination, and solid waste. The company also has preventive maintenance programs for its process and it has a continuous improvement approach to enhance its E&S systems and ensure all established procedures and requirements are duly followed. As needed, the company commissions environmental audits and environmental impact assessments when engaging either in new projects and/or upgrades to existing operations that pose materials changes. In addition, it establishes annual action plans to improve the environmental, health and safety (EHS) aspects of its operations.

Three of Calidra’s plants have received the “Clean Plant” and “Safe Plant” certifications that the Mexican environmental authorities awards to Mexican companies that voluntary adopt good environmental, health and safety practices. Other Calidra plants are also preparing themselves to apply for such certification. Calidra expects to have all is plants certified by 2011. In addition, 3 of its plants are preparing for ISO 14001 and OSHAS 18001 certifications. Currently, the company is up-to-date with all local environmental requirements with the exception of Calhidra de Sonora and Calidra de Occidente for which it has an agreed compliance plan with the local environmental authorities.

- Environmental, Health, and Safety (EHS) Management and Organization

Calidra’s sustainability department, which reports directly to the Chief Executive Officer (CEO,) recently established its corporate environmental, health, and safety (EHS) division to implement strategic goals, and objectives and ensure that its operations comply with its local as well as international environmental commitments in cooperation. This division will work with the EHS personal in charged of the day to day aspects at each one of its plants.

As part of managing the EHS performance of its operations, Calidra has developed performance indicators and targets (i.e., m3 water/ton of product, energy used/ unit lime produced, unit lime produced/unit raw material extracted, etc.) which allow the company to measure the effectiveness of its operations. All plants continue to develop programs aimed to reach best practice targets and to reach zero-discharge operations.

The overall handling, reclamation, and safety aspects of the quarries are being handled also at corporate level, with local EHS presence at each of the quarries.

Calidra also manages the EHS performance of its contractors with practices such as conducting induction training about the company’s EHS practices and associated job risks, establishing contractual requirements, conducting audits, etc.

- Training:

Calidra has its own training facilities where periodically conducts EHS training for its own employees, as well as contractors. Calidra conducts induction for new employees; targeted training for managers and specialists; specific job risks training; quarterly EHS refresher courses, testing of training effectiveness, etc.

- Monitoring:

The company has monitoring programs in place to asses its EHS performance. Calidra monitors air emissions, water consumption, liquid effluents, ambient noise, ambient air, as well as workplace conditions and work-related accidents/incidents.

The monitoring results of the various parameters measured from the company operations reflect an overall reduction in environmental and safety impact (tons of air emissions released, volume of wastewater discharged, etc.) and number of accidents.

- Reporting

Calidra prepares annual monitoring reports for the local environmental authorities. It also prepares and publishes an annual memoir which includes basic EHS aspects.

- Community Engagement

Even though, several of Calidra operations (6) have communities nearby, Calidra’s track record of community projects reflects very well in the very low or no complaints from the communities. Calidra’s corporate philosophy recognizes that contributing to the community development is both good business and good ethics. Specifically, Calidra gives preference to hiring locally and to use local suppliers of goods and services whenever possible, it sponsors education programs within the communities it operates, facilitates construction materials to local municipalities and education centers at discount prices, and promotes micro enterprises, among many other programs.

- Labor and Working Conditions

- Human Resources Policy and Management:

Calidra has a Human Resources (HR) department in charge of implementing the company’s HR policy and systems for all its operations including ethics code, training protocols, work conduct, employee competencies models, mechanisms to handle and resolve employees and contracted laborers’ grievances, etc. These policies and procedures are fully compliant with local requirements and IFC’s PS2 requirements.

- Non-Discrimination and Equal Opportunity:

The company is an equal opportunity employer. All hiring and promotions are merit-based.

- Protecting the Workforce:

There is no child or forced labor at any of its operations. The company also ensures that the contract laborers are at least 18 years old. In addition to the compliance with in-country labor laws, the company has programs to follow the health of its employees by providing periodical physical and work-related medical check-ups to his employees provides additional benefits to its employees (i.e., extended health insurance to employees’ families, alphabetization programs, educational support, loan programs for employees, etc.) The local authorities conduct periodic labor audits. No irregularities were found.

- Workers Organizations

Calidra employs approximately 1516 employees of which approximately 50 percent are direct employees and the remaining 50 percent are hourly employees. Calidra employees have the right of association as per the Mexican labor laws. Currently the company has 777 unionized employees.

- Retrenchment

Calidra had the last personnel reduction in 2006 (75.) This reduction was conducted in accordance with the local labor requirements. The company does not have any pending legal actions as a result of this retrenchment. In case, Calidra further reduces its labor force, it will submit to IFC a retrenchment plan prior these labor reductions begin to take place. This plan will include the actions/agreements/additional initiatives the company will carry out to comply with the Mexican labor laws and with applicable requirements of PS2.

- Occupational Health and Safety (OHS)

Calidra has an OHS management system in place to coordinate all relevant OHS aspects of its operations. Key OHS programs include assessing employees’ general and occupational health, evaluating work-related risks and preventing occupational impacts, workplace monitoring, maintaining records of accidents and incidents, and implementing corrective measures to reduce negative EHS impacts. It has appropriate medical services at all its operations and conducts regular medical check-ups including those for employees working in dangerous and hazardous areas. It provides personnel protective equipment (i.e., uniforms, respiratory protective devices, boots, etc.) which are required to be used at all times. The company has response equipment and trained personnel, available at all times, to handle fire/emergency response actions.
Calidra continues strengthening its OHS systems to reduce the likelihood of lethal accidents. In addition, its accident numbers have been decreasing (i.e., 52 in 2005, 33 in 2006, and 23 in 2007). This reduction rate will further improve with the development of the procedures needed to obtain the OSHAS 18001 certification, with the implementation of the E&H action plan Calidra has already developed, and with the work place risk assessment currently on-going. Details of the H&S action plan will be provided to IFC as indicated in the ESAP.

Calidra has also established workers grievance mechanisms by which employees can go directly to the supervisor or contacts its union leaders. In turn, Calidra follows, resolves, and documents those grievances.

- Pollution Prevention and Abatement

- Raw Materials and Resource Consumption:

Calidra owns and operates all its quarries with the exception of that in Honduras, which is operated by a contractor. As part of its overall optimization approach, Calidra aims to exploit its limestone in a way it maximizes the use of its raw material. To that effect, since it began taken over the operation of its quarries it has enhanced the overall exploitation scheme of its quarries.

The company obtains the water for its process needs mainly from own wells or authorized groundwater concessions. Calidra has been researching options to optimize its water use, particularly on those hydrating plants located in scare water areas. It is anticipated that Calidra will begin recovering the water vapor is released to the atmosphere in the near future.

Even though the company has a diversified fuel sources by which it uses pet coke (approx. 68%), natural gas (approx. 16 percent), heavy fuel oil (approx. 12%), coal (approx 3%) and wood (approx 2%), Calidra is looking forward for further reductions in the use of non-renewable fuels and increase the use of biofuels and biomass. In addition, Calidra is also looking into establishing programs to reduce the consumption of electric energy in its plants.

- Air Emissions, Ambient Conditions, and Liquid Effluents

Six of its nine calcination plants have already completed the installation of efficient Maerz kilns and currently, there is one new kiln being installed at Calhidra de Sonora plant. As part of this project, Calidra will continue replacing non-efficient vertical kilns by Maerz kilns and anticipates having completed the installation of Maerz kilns at all its plants by 2010.

In addition, Calidra has been consistently working towards reaching compliance with the IFC requirements and it is committed to ensure that the air emissions of all its kilns fully comply by 2008, with the exception of the newly acquired operation in Occident which will take additional time, as indicated in the ESAP. Even though the company has controls for the particulate emissions of the hydrators, it needs to further enhance the air pollution control to ensure full compliance of the hydrators’ performance with the IFC requirements. To address this aspect, Calidra has established a hydrator’s technical committee and aims to reach full compliance of most of its hydrators by the end of 2008, as indicated in the ESAP.

The results of the periodic ambient monitoring indicate that the particulate concentrations at some of the plants are also still above compliance. Thus, Calidra is committed to implement a rigorous program (i.e., control material transference points, open conveyor belts, etc.) to curtail fugitive emissions as indicated in the ESAP.

The company generates storm waters, and domestic wastes (there is no process effluent generated.) The effluents are treated prior being discharged; however, there are few plants that need to further enhance its controls. Details of the improvement programs to reach compliance are indicated in the ESAP. Domestic wastes are either discharged into the municipal system or into well maintained septic tanks.

- Solid and Hazardous Wastes:

Calidra is implementing a solid waste management system and some of its plants already have a residues segregation program. Calidra anticipates having this program in place at all its plants by 2010. Once established, the program will ensure that once segregated, the hazardous and non-hazardous wastes are properly disposed following local requirements. Specifically, the hazardous wastes (i.e. waste oils, materials contaminated with the oils, etc.) will be properly collected, stored and send for final disposal by an authorized contractor.

Calidra is making efforts to reduce the generation of solid wastes. Specifically in 2007, it began reinjecting back into two kilns the particulates collected in the air pollution control filter from those two kilns at the Cal de Oriente and Caleras de la Laguna plants. The company anticipates extending this practice to the remaining three kilns at Calidra de Oriente by the end of 2008 and then transferring this practice to the remaining plants that use pet coke as fuel.

- Hazardous Materials:

Hazardous materials at Calidra operations include fuel oil and explosives. The fuel oil, for those plants that use it as fuel, are stored in above storage tanks with double containment and all safety measures to prevent spills during loading and unloading. Calidra also provide fuel for vehicles in the quarries and the storage tanks have their safety systems.

Most of the quarries have safe, dedicated areas to store the explosives as well as has rigorous procedures for its handling. There are periodic audits conducted by the military forces to ensure all operations, procedures and systems to handle and use explosives comply with the local requirements. Calidra also has contractual agreement with explosives providers so that they bring the explosives when needed at the quarry (i.e., Calidra de Oriente.). Thus, eliminating the need of having explosives stored within the quarry premises.

- Reforestation

Calidra operations are required to include reforestation as one of the activities related to quarry reclamation. As such, it has established programs at some of its quarries. Specifically at the Cal Qu�mica Mexicana plant, it has a comprehensive reforestation program for which, it has also established its own nursery. For the Calidra de Oriente plant, it has established an ambitious 10 ha reforestation program which is almost complete. In addition, it also has on-premises reforestation programs for its plants which is on-going at some of the plants (Incal in Honduras.) To further improve the quality operations of the quarries Calidra is in the process of developing an Integrated Quarries Management Plan that includes current status, corrective actions, good practices procedures, and monitoring parameters.

- Operational Safety

Calidra has established procedures to ensure the safety of its operations including a program of supervision and risk control, periodic internal audits, and integration of EHS aspects. Calidra is working towards ensuring that all plants have continuous gas leak detectors, sound alarms, and permanent pressure and temperature controls. Calidra has clearly identified the plants that need to strengthen its safety measures and will submit to IFC the list of the plants with its specific actions and implementation table as indicated in the ESAP.

- Emergency Preparedness and Response

For each plant, Calidra has developed emergency response and contingency plans. Key elements of these plans include procedures for internal/external communications, response organizations/contacts, involving neighboring plants in mutual aid plans for the transport of hazardous materials.

All plants have prevention/response programs in place (i.e., trained fire/emergency response brigades available at all times, periodic emergency response drills, fire prevention/response equipment such as alarms, sprinklers, signals, hydrants, dedicated fire water tank, and extinguishers throughout the operations sites.) Calidra also keeps an incident log to register the emergency situations and the mitigation actions.

- Green House Gases (GHGs):

Calidra’s operations are a significant source of carbon dioxide from its own operations as well as CO2 and other GHGs from its fuel consumption. The company is making efforts to optimize its operations by replacing obsolete technology thus reducing CO2 emissions from fuel consumption and low product yield. Currently the overall CO2 generation from its processes reaches 760,000 tons/year. The energy consumption (electric) for the entire company is approximately 123,000,000 Kw-h/yr. Calidra has just been invited to participate in a group of companies that will get their electric power from a wind power project in the state of Oaxaca region by 2010. It is anticipated that by 2010 when all plants have efficient Maerz kilns, the amount of energy used will reduce 185,000 tons/yr of CO2 with the same production.

- Protection of Cultural Property:

None of the projects that the company is implementing is located in areas where cultural resources, such as sites of archaeological value, are likely to be found.

- Land Acquisition:

Calidra has programs in place for land acquisition. All its acquisitions are willing buyer-willing seller and the company is committed to avoid any land acquisition that involves any physical and/or economical displacement. However, if Calidra were to become involved in acquisitions involving physical and/or economical displacement, Calidra would inform IFC prior conducting this transaction and will develop a Resettlement Plan to IFC satisfaction prior beginning such transaction.

- Community Health, Safety and Security:

Internal and external communication is important for Calidra. This includes both consultation with communities located near Calidra operations as well as internal training programs designed to fill the gap between job needs and the actual worker capabilities and education. If yet informal, Calidra has grievance systems to handle complaints or comments from the community. Complaints and observations from external groups or members of the local community are received by the plant General Manager who directs the efforts for resolving the complaints as appropriate. Calidra will develop a more formal and consistent grievance system at corporate level and community grievance programs at all its plants by 2009 as indicated in the ESAP.

The company has established monitoring programs to assess potential impacts to the community. The monitoring results indicate that there are only few negative impacts at some of the plants affecting the communities (i.e., ambient noise, ambient air) for which Calidra is establishing programs to eliminate these impacts.

- Transportation:

Calidra’s transportation of raw materials and products is both own and subcontracted. In its effort to ensure that the inherent potential risk due to traffic accidents does not cause indirect negative impacts, Calidra is preparing a Transportation Management Plan that will be completed by 2009. This plan will include minimum safety requirement needed, training if needed to be provided, key clauses for contractual agreements with contractors, etc.

- Product Stewardship:

Calidra is committed to produce safe products, disclose the inherent risks in the use and handling of its products, and share the good environmental and safety practices it applies in its industrial sites. Calidra produces a newsletter that distributes among employees, clients, and communities. It brings environmental themes and environmental awareness campaigns.

- Conclusion:

As part of the project, the Calidra is committed to operate all existing operations beyond the realms of this proposed project in compliance with the applicable IFC requirements. Accordingly, IFC concludes that the proposed project will meet the applicable World Bank/IFC environment and social policies and the environmental, health and safety guidelines upon successful implementation of the agreed mitigation measures listed in the ESAP.

- Monitoring:

IFC will evaluate the project’s compliance with the applicable environmental and social requirements during the lifetime of the project through the following methods:
- Review of the annual monitoring reports (AMRs) prepared for the project;
- Review the status of implementation of any measures contained in the ESAP;
- Review ongoing performance of project-specific environmental, health, safety, and social activities; and
- Conduct periodic site supervision visits.

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